Alabama's toxic lending problem: Who cares?

Dr. Berte is President Emeritus of Birmingham-Southern College and a member of the Alabama Consumer Credit Task Force. He can be reached at nberte@bsc.edu.

Until 2003, Alabama did not have a problem of predatory lending. But today we have the most toxic lending laws in the country that take money from vulnerable Alabama borrowers and their families, and drive them into a downward spiral of poverty. The average payday loan APR is 300% plus, but high-cost lenders are able to charge up to 456% APR interest.

Does anybody really care?

It turns out that many people care deeply about this horrific situation, but maybe for different reasons.

Based on an article on AL.com by Kyle Whitmire in March, 2015, payday lenders gave more than $475,000 to lawmakers during the last election season, including top legislative leaders and members of key legislative committees. If a person is running for the next session of the legislature, they can start accepting political contributors this June. While many legislators have stepped forward to encourage reform, well-paid lobbyists have so far kept the Alabama legislature on the side of the industry.

The Bible takes lending and debt very seriously. So does the faith community in our State. As Reverend Scott Dawson, Evangelist, Scott Dawson Evangelistic Association, stated recently in Yellowhammer:"Exploiting the poor through predatory lending practices was wrong in Biblical times and it remains wrong in Alabama communities today. Sadly, the state of Alabama has a true problem when it comes to predatory, toxic loans, and it is time for a change." Reverend Dawson joins many other faith-based organizations, such as the Alabama Baptist Convention, both the North Alabama and the Alabama West Florida Conferences of the United Methodist Churches, the Alabama Episcopal Church, the Catholic Diocese of Birmingham and Anniston, plus other faith groups, along with human service providers and not-for-profit groups, who are finding it difficult to keep up with the increased number of requests of support for food, housing, and basic subsistence.

Does anybody really care?

The Community Foundation of Greater Birmingham commissioned the Public Affairs Research Council of Alabama to conduct a poll of registered voters in 2017. It turns out the average Alabama citizen cares deeply about Alabama's toxic lending problem. Here are a few highlights from the results: two-thirds of Alabamians support banning payday loans outright; 65% of Alabamians support a 36% APR cap on payday loans; 63% of Alabamians support banning high cost installment loans.

Dr. Neal R. Berte

In addition, focus groups conducted by Polis Services were selected from rural and urban areas across Alabama, and the number one priority recommended was to reduce the maximum interest rate that payday lenders can charge customers; and an overwhelming majority of the focus group participants said they will not vote to re-elect legislators who take money from the lending industry and then vote against meaningful reform. Interestingly, United States Military can only be charged 36% APR.

In an article in September, 2016, written by Kim Chandler, reporter for The Associated Press, and based on a report compiled by the Alabama Banking Department, Alabamians took out more than two million payday loans in 2015, an average of eight loans each, with 246,824 unique borrowers. After a court fight with the lending industry over the legislature passing legislation to create a database to find out what the magnitude of the payday loan usage was, the Alabama Supreme Court upheld the creation of a statewide database.

Only the legislature can act to put an end to the triple-digit interest rates charged by these payday companies, with a majority of the huge profits paid to high cost lenders going to their corporate offices in other states. Major reform Bills are under consideration in the Alabama legislature.

ONLY THE VOICES OF ALABAMA CITIZENS CAN BRING RELIEF TO ALABAMA'S TOXIC LENDING PROBLEM. PLEASE CALL, EMAIL, WRITE OR TEXT YOUR LEGISLATORS AND DEMAND MAJOR REFORM OF OUR PREDATORY LENDING LAWS BEFORE THE SESSION CONCLUDES AND NOTHING HAPPENS AGAIN TO GIVE RELIEF TO OUR MOST VULNERABLE CITIZENS!